Australia deal boosts EU FTA network but raises question of what next

David Henig looks at the impact of the recently signed EU-Australia deal, as well as the EU’s wider approach to Free Trade Agreements in light of geopolitical uncertainty. 

Signing a Free Trade Agreement with Australia is the latest step in the EU’s clear acceleration towards completing a programme started in the mid-1990s to secure improved terms of trade for its exporters across the globe. President Trump’s disregard for trade rules is helping, as the Commission and most member states want to show they will not be following suit. Where this also leads is an emerging question as to what will come next for EU trade policy, not least given these FTAs can be set against measures that point in a more protectionist direction.

Early details suggest this new EU-Australia deal is mostly a traditional one focusing on removing what were already low tariffs for industrial goods, protecting EU geographical indications, and offering limited access to EU agriculture markets. There are some elements that go beyond this, such as cooperation on critical raw materials, but steel is notably excluded given EU desires to restrict imports.

This is not going to be any kind of economic game-changer not least in a world in which EU industrial goods are increasingly struggling to be competitive with those from China. Nor is this new trade deal really the basis of some kind of alternative world trade order to the WTO, even one undermined by the US breaking its commitments by raising tariffs and then coercing countries into deals to reduce them. At best one can see the EU’s hurry to expand its network of trade agreements as a form of insurance against a possible future without a well-functioning WTO.

At this stage even the traditionally free trade-hostile French government appears to be happy with a deal that is far less generous in terms of market access for meat imports than both the EU-Mercosur deal and the deal which the UK negotiated with Australia in 2021. There may even be an element of satisfaction that this shows Brussels doing better in negotiations than London. This Australia deal also means that the EU has matched the post-Brexit trade deals secured by the UK with the exception of accession to the trans-pacific CPTPP bloc, filling an obvious gap in an already extensive set of bilateral FTAs.

Despite overt French opposition, the EU-Mercosur agreement will come into provisional effect from the start of May 2026. This demonstrated some skilful political handling from a Commission responsible for negotiations with a Parliament that has yet to give its approval given that it has become the custom if not the legal reality that this is required. In particular the Chair of the International Trade Committee, German Social Democrat Bernd Lange, professed himself satisfied. His voice is increasingly important as the EU struggles with a turbulent global picture.

Earlier this year the EU completed negotiations with India, which as with an earlier agreement with Indonesia, should come into force before the end of this Commission term in 2029. Experienced Brussels trade hands are also increasingly confident that there will be more deals in the next three years. Talks with Thailand, Malaysia, and the Philippines are advancing, as are more recently launched ones with the UAE. All of this will point towards a highly productive five years for EU trade policy.

Less is expected of discussions between the EU and the twelve members of the CPTPP that include the UK. While these are among the stronger supporters of global trade rules, what is mostly being discussed is some fairly limited cooperation starting by restating approaches on digital rules. Commission sources have previously said that cooperation between two blocs is outside of their comfort zone, and going further such as by providing tariff-free access for goods produced using CPTPP supply chains would run into fears around the impact on EU industry.

This problem in dealing with CPTPP cooperation demonstrates one of the EU’s major trade policy challenges for the future, of how to move beyond traditional FTA issues into working with other countries on some of today’s challenges such as the growing economic security agenda. Existing Free Trade Agreements are in danger of being devalued as measures like the carbon border adjustment mechanism, investment restrictions, abolition of de minimis customs exemptions for low-value imports, and ‘Made in Europe’ content requirements are excluded. However, to incorporate these would be challenging, as debate over the latter (about which countries should count as ‘Made in Europe’) is showing.

Even more difficult an issue is the EU approach to trade with the US and China, the only countries among its top trade partners with which it has no traditional trade agreement. Member state leaders continue to float the possibility of resurrecting a proper US-EU trade agreement, presumably under the next President, ten years after the failure of Transatlantic Trade and Investment Partnership talks. Longstanding differences on food and digital regulations, and public procurement, still look very difficult to overcome however. The Turnberry Agreement, now approved by the European Parliament, is best seen as a temporary response to Trump’s coercion (by reducing tariffs on EU imports) that may not even last his term.

An EU-China trade agreement seems even more improbable due to concerns about EU industry and the political effect that would have on US-EU ties. This, however, also reveals why there is no prospect of resurrecting a stronger WTO, as the three would need to agree on something for it to happen.

Such then has been the approach of this Commission under pressure from President Trump, to accelerate the tried and tested and park the more difficult issues for another time. As a strategy for survival there is considerable logic. It is however not really a basis for tackling the fragmentation of rules currently afflicting the world trade system, still less for addressing the challenges of modern global markets. Thus, as one programme to sign new FTAs comes to an end there is a serious need to think about what will come next, but work that has barely started.

By David Henig, Director of the UK Trade Policy Project at ECIPE.